PRINCIPLES OF MANAGERIAL FINANCE

Topics: Corporate finance, Dividend, Finance Pages: 17 (3851 words) Published: June 7, 2015
PRINCIPLES OF

MANAGERIAL
FINANCE
TWELFTH

EDITION

LAWRENCE J. GITMAN
SAN DIEGO STATE UNIVERSITY

PEARSON

Prentice
Hall
Boston San Francisco New York
London Toronto Sydney Tokyo Singapore Madrid
Mexico City Munich Paris Cape Town Hong Kong Montreal

Contents
Preface

xxxi

Revised Content

xxxiii

Supplements to the Twelfth Edition
Acknowledgments
To the Student

xxxvii

xl

xliii

Part One

Introduction to Managerial Finance 1

Chapter 1
The Role
and Environment
of Managerial
Finance
page 2

1.1 Finance and Business
What Is Finance? 4

1.4

Major Areas and Opportunities
in Finance 4
Legal Forms of Business
Organization 5
Why Study Managerial Finance?
Review Questions 9

Financial Institutions 22
Financial Markets 23
The Relationship between
Institutions and Markets
The Money Market 23
The Capital Market 24

1.2

Starbucks—A Taste for Growth
page 3

The Managerial
Finance Function

9

Organization of the Finance
Function 10
Relationship to Economics 10
Relationship to Accounting 11
Primary Activities of the
Financial Manager 13
Review Questions 13
1.3
Goal of t h e F i r m 13
Maximize Profit? 14
Maximize Shareholder Wealth 15
Corporate Governance 16
The Role of Business Ethics 17

Financial Institutions
and Markets 22

IN PRACTICE Focus on Practice:
Berkshire Hathaway-Can Büffet Be
Replaced? 28

Review Questions
1.5

Business Taxes

Ordinary Income
Capital Gains

29

31

Review Questions
Summary

32

32

Self-Test Problem

34

Warm-Up Exercises
Problems

34

35

I N PRACTICE Focus on Ethics:
Ethics at HP

Spreadsheet Exercise

19

Group Exercise
Web Exercise

xiv

29

Chapter 1 Case: Assessing
the Goal of Sports
Products, Inc. 38

The Agency Issue 19
Review Questions 21

23

40
41

39

29

CONTENTS

Chapter 2
Financial
Statements
and Analysis
page 42

2.1

The Stockholders'
Report 44

2.6

The Letter to Stockholders
The Four Key Financial
Statements 44

44

IN PRACTICE Focus on Ethics: Back to
School on Ethics 45

Notes to the Financial
Statements 51
Consolidating International Financial
Statements 52
IN PRACTICE Focus on Practice: Is It Time
to Change SOX? 53

Review Questions

2.2
Netflix, Inc-The Red Tide
Is Coming
page 43

Using Financial
Ratios 53

Profitability Ratios

65

Common-Size Income
Statements 66
Gross Profit Margin 67
Operating Profit Margin 67
Net Profit Margin 67
Eamings per Share (EPS) 68
Return on Total Assets (ROA) 68
Return on Common Equity
(ROE) 69
Review Questions 69
2.7

53

xv

M a r k e t Ratios

69

Price/Earnings (P/E) Ratio

69

Market/Book (M/B) Ratio

70

Review Question

71

Interested Parties 54
Types of Ratio Comparisons 54
Cautions about Using
Ratio Analysis 56
Categories of Financial Ratios 57
Review Questions 57

Summarizing All Ratios 71
DuPont System of Analysis 75
Review Questions 77

2.3

Summary

L i q u i d i t y Ratios

Current Ratio 58
Quick (Acid-Test) Ratio
Review Question 59

58

Debt Ratios

A Complete Ratio
Analysis 71

78

Self-Test Problems
59

2.4 A c t i v i t y Ratios 59
Inventory Turnover 60
Average Collection Period 60
Average Payment Period 61
Total Asset Turnover 62
Review Question 62
2.5

2.8

62

Debt Ratio 64
Times Interest Eamed Ratio 64
Fixed-Payment Coverage Ratio 65
Review Questions 65

79

Warm-Up Exercises
Problems

80

81

Chapter 2 Case: Assessing Martin
Manufacturing's Current Financial
Position 98
Spreadsheet Exercise
Group Exercise
Web Exercise

102
103

100

xvi

CONTENTS

Chapter 3
Gash Flow
and Financial
Planning
page 104

3.1

Analyzing the Firm's
Cash Flow 106

Depreciation 106
Developing the Statement
of Cash Flows 109
Operating Cash Flow 112
Free Cash Flow 115
IN PRACTICE Focus on Practice:
Free Cash Flow at eBay 116...
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